Inflation increase driven by fuel and clothing

INFLATION rose 0.2% last month to 2.9%, according to official figures.

The Office for National Statistics said the largest upward contribution came from motor fuels and clothing and footwear.

Downward pressure came from air transport which fell back after a sharp rise in May.

The Consumer Prices Index (CPI) inflation rate is slightly above the figures seen over the previous 12 months but below the levels reached between the start of 2010 and spring 2012.

Inflation has been running above its 2% target for the past four years but the Bank of England believes it will rise further to around 3% during 2013. The Bank expects inflation then to ease back and return to target in 2014.

The increase in June means that new Bank of England Governor Mark Carney avoids having to write to Chancellor George Osborne to explain the hike - he has to do so if it hits 3%.

Richard Campbell of the ONS said: "A 1p rise per litre in the cost of petrol and diesel, compared with a fall of around 4p per litre in the same month last year was a significant factor along with clothing and footwear.

"We would have seen a larger rise in the month but for air fares, which after a rise last month fell back and brough downward pressure, particularly in Europe and long haul."

Source: James Graham
The Business Desk